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BusinessDesk: Former cabinet ministers Graham and Jefferies in court

BusinessDesk: Former cabinet ministers Graham and Jefferies in court

The directors of failed lender Lombard Finance & Investments pleaded not guilty to claims they published untrue statements in a prospectus and investment statement leading up to its eventual collapse in 2008.

Lombard was #25 in interest.co.nz's Deep Freeze list.

The directors can’t shirk their responsibility for the firm’s overexposure to property development and weak financial position, the Crown prosecutor says.

Colin Carruthers told the High Court in Wellington that a director’s duty is to direct, and that they can’t dump their responsibility on to management or other external parties, such as auditors, solicitors or independent advisers.

“The issue is this – what is the role of the director? What is it the director assumes is his duty to perform?” Carruthers said. “If the argument becomes the director could rely on management, could rely on auditors, could rely on solicitors, could rely on trustees, could rely on the Registrar of Companies, what is the director’s role in all of this?”

Directors Michael Reeves, Doug Graham, Bill Jeffries and Lawrence Bryant today pleaded not guilty to five counts relating to claims they made untrue statements in a 2007 prospectus, investment statement and advertising material.

Lombard Finance raised some $12.7 million during the period the documents were available, the court heard.

Carruthers told Judge Robert Dobson that Lombard Finance’s lack of liquidity should have been disclosed to investors, who weren’t able to make an informed decision from the amended prospectus and investment statement. Loans needed to be severely impaired after it failed to attract the required cash flow from its five major lenders, he said.

The over-exposure to lenders who made up the majority of the loan book breached the company’s credit policy, as did repeated extensions granted on the loans when they were late.

Carruthers said the chairman, former Justice Minister Graham, faces greater consequences, as he failed to implement strong governance procedures that could have provided investors with appropriate disclosure.

Last year, the then-Securities Commission laid civil and criminal proceedings against the directors.

Lombard went into receivership on April 10, 2008, owing approximately $111 million to about 3,900 debenture holders, $10 million to 310 capital note holders, and $4 million to subordinated note holders. It is unlikely that secured debenture holders will receive more than 24 percent of their investment back. Unsecured creditors are likely to receive nothing.

The case in continuing.

(BusinessDesk)

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10 Comments

Parasites Graham and Jeffries, Both Justice ministers Nat and Lab. respectively.  Sucked $127million out.  The government system is full of these parasites to make it more shameful these are Justice ministers.  I guess there were no primary dealers involved in this company or why did they not get a bailout.

Ex justice ministers possibly going to jail - a nice thought. From there, on to ex finance and prime ministers?

Not while the lunatics are running the asylum...Colin....this will be a case of Justice having seen to be  "performed" ....rather than actually being done.

Some interesting ironies here. Former Justice Ministers from both major parties working together to parasitise thousands of lenders. Provides scope for radically different interpretations of cabinet collective responsibility - for after the lunatics have been replaced.

I would point out ColinR...ironies almost always have an accidental or how peculiar component....parasitic behavior by those in a position to safeguard such behavior (in Law) would probably be deemed as foreseeable ..and their connected outlook as one of species behavior.

So, some interesting venalities then?

Absolutely...! Colin...beyond opportunism......deliberation in positioning..........intent.

The good Sir will be pulling every favor owed thoughout his ghastly tenure, I should say...disgusting individual.

Now I seem to recall that our current Justice minister is leaving to join the parasite sector after the election wtf?

Don't you mean transferring to a different part of the parasitic sector?

A fine of 10,000 dollars and 9 months home detention.

We wouldn't want them lowering the tone of our prisons, would we?